Licensing a Malta Payment Institution

Malta is the ideal jurisdiction in which to set up a Financial Institution under the Payment Services Directive. Payment Services are regulated in Malta by the Financial Institutions Act which also regulates Electronic Money Institutions. CSB Group’s professionals are geared to assist clients with the licencing of the payment institution.

The Malta Payment Services Directive

Following the transposition of the Payment Services Directive (Directive 2007/64/EC) into local legislation, standalone payment service providers (“PSPs”) or “payment institutions” are regulated in Malta by the Financial Institutions Act (Chapter 376, Laws of Malta), which also regulates Electronic Money Institutions (since the 1st July 2011) and other financial services.

Malta-Licensed Payment Institutions – Permitted Activities

A payment institution licensed in Malta may undertake the following activities:

A. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account;

B. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account;

C. Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider among which:

execution of direct debits, including one-off direct debits;

execution of payment transactions through a payment card or a similar device;

execution of credit transfers, including standing orders;

D. Execution of payment transactions where the funds are covered by a credit line for a payment service user among which:

execution of direct debits, including one-off direct debits;

execution of payment transactions through a payment card or a similar device;

execution of credit transfers, including standing orders;

E. Issuing and/or acquiring of payment instruments;

F. Money remittance;

G. Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services.

Malta-Licensed Payment Institutions – Additional Permitted Activities

Licensed payment institutions may also carry out the following additional activities:

The provision of operational and closely related ancillary services such as ensuring execution of payment transactions, foreign exchange services strictly in relation to payment services, safekeeping activities, and storage and processing of data;

The operation of payment systems (in terms of the Malta Financial Institutions Act, “payment system” means a funds transfer system with formal and standardised arrangements and common rules for the processing, clearing and/or settlement of payment transactions);

Business activities other than the provision of payment services, provided that these do not impair or threaten to impair either the financial soundness of the institution or the ability of the competent authority to monitor the financial institution’s compliance with applicable laws and regulations;

When payment institutions engage in the provision of payment services, they may only hold payment accounts used exclusively for transactions; any funds received by payment institutions from payment service users with a view to the provision of payment services shall not constitute a deposit or other repayable funds within the meaning of the Banking Act

Payment institutions may grant credit related to payment services referred to in paragraphs (D), (E) or (G) above only if the following requirements are met:

the credit is ancillary and granted exclusively in connection with the execution of a transaction; and

notwithstanding national rules on providing credit by credit cards, the credit granted in connection with a payment and executed with the act shall be repaid within a short period which shall in no case exceed twelve months; and

such credit is not granted from the funds received or held for the purpose of executing a payment transaction; and

the own funds of the payment institution are at all times, to the satisfaction of the supervisory authority, appropriate in view of the overall amount of credit granted.

Minimum Initial Capital Requirement

In terms of the provisions of FIR 01/2010, the minimum initial capital requirement is dependant on the specific activities to be carried out by the applicant. Accordingly, where the institution provides any of the payment services listed in paragraphs (a) – (e) of the permissible activities listed above, its minimum capital requirement will be of €125,000. Where the institution provides only the payment service listed in paragraph (f) above, its minimum capital requirement will be of €20,000 and where the institution provides the payment service listed in paragraph (g), its minimum capital requirement will be of €50,000.

Passporting of Payment Institution Licence

Once the Malta licence is obtained, it would then be possible to passport such licence into the EU/ EEA Member State countries by following some basic procedures of notification. This would enable the Maltese Company to provide its services within the relevant member state/s either through the establishment of a branch or remotely.

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CSB Group is a Malta based corporate services provider with expertise in corporate tax structuring, financial services, Malta company formation and company services, back-office services, professional investor funds, corporate law firm and fiduciary, corporate services and general administration to businesses and private clients worldwide.